Still forbidden fruit

India wants Apple, but bureaucracy won’t let it happen

In the case of phone manufacturers like Apple, there is very little the company can source since there are no suppliers for parts that it requires and shifting designing, if at all, takes time. (Source: Reuters)

Given how desperately the government wanted to woo high-profile US companies like Apple, it is truly amazing how it has allowed itself to be thwarted by the bureaucracy every step of the way. What makes it all the more nonplussing is that the Narendra Modi government was elected on the premise it would change many of the growth-restricting policies brought in by the UPA—the single-brand retail policy was a classic example. The UPA’s 30% local-sourcing norm never made sense since, given a choice, every firm wants to do more local sourcing to cut on both logistics costs as well as import duties which, after the NDA came in, are as high as 11% for phones that are not made in India—what keeps firms from doing more local sourcing is the fact that the local market is simply not developed enough, and developing quality suppliers can take years, if not decades. In the case of phone manufacturers like Apple, there is very little the company can source since there are no suppliers for parts that it requires and shifting designing, if at all, takes time. That is also the reason why, despite all the talk by firms like Foxconn, no real phone manufacturing plant has been set up in the country so far.

It took the NDA a year-and-a-half to study what was needed to change the policy. Yet, when it came out in November last year, the policy was vague—it said the government ‘may’ ‘relax’ sourcing norms for products that had ‘state-of-art’ and ‘cutting-edge’ technology and where ‘local sourcing (was) not possible’. The policy offered no clarity on whether the local sourcing would be relaxed or not, what relaxation meant, what cutting-edge and state-of-art were and who would decide whether local sourcing was not possible. But government officials privately said the policy was meant to ensure Apple came in—presumably, Apple was told the same thing since it then applied to set up its own shops here. Yet, the application was rejected by the very government that was wooing Apple.

The government went back to the drawing board and, seven months later, it unveiled a policy it chose to describe as full of ‘radical changes’. Yet, the bureaucracy ensured the language was even vaguer. This time around, the local sourcing norms were to be ‘relax(ed)’ for ‘up to three years’, after which there would be ‘a relaxed sourcing regime for another five years’ for firms which had ‘state-of-art’ and ‘cutting-edge’ technologies. Apart from the vagueness of the earlier norms, new ones were introduced—how much was the initial relaxation going to be for, how much relaxation would there be? Naturally enough, though the same officials said Apple would now come in, Apple has not applied under even the NDA’s second iteration of the law. While the government had said that Apple has been told of the changes, the US Trade Representative brought up restrictive single-brand retail norms with the commerce minister on Thursday. If the government doesn’t really want Apple to set up shop here, it should give up the pretence of changing the law to woo it—but if it really wants Apple but is being stymied by the bureaucracy, that’s an even bigger shame.